Reuters Money

Alzheimer’s: Early planning critical to financial health

Jean Dorrell knew something was wrong when the birthday card her father usually sends two weeks ahead of schedule didn’t arrive in the mail.

“This past year he forgot my birthday and he forgot my brothers’ birthdays, so we realized he was slipping pretty fast,” says Dorrell, a certified financial planner and founder of Senior Financial Security in Summerfield, Florida.

An Alzheimer’s diagnosis is a devastating blow, one that requires immediate action to ensure the financial resources built over a lifetime can sustain a person through this progressive and fatal disease.

The costs associated with Alzheimer’s can be just as debilitating as the symptoms. In 2004 — the latest data available — the cost of caring for a Medicare patient with Alzheimer’s or other dementia was $42,072 compared to $13,515 for patients without these conditions. (Those figures have been adjusted for 2010 dollars).

And the costs are climbing: Healthcare, long-term care and hospice payments for Alzheimer’s and dementia are projected to increase from $183 billion in 2011 to $1.1 trillion in 2050 (in 2011 dollars), the AA report states.

Despite the hefty price tag for care, the financial services industry seems ill-prepared to deal with the needs of this particular group. Even though 84 percent of financial advisers have come in contact with a client who suffers from Alzheimer’s, 96 percent don’t feel ready to assist, according to a 2009 study from Fidelity Investments. Kevin Kautzmann, a certified financial planner with EBNY Financial LLC in New York, says that’s got to change. ”While there is a prevailing fear within the industry of accusing a client inappropriately and getting fired for it, if the issue is handled with respect and sensitivity, clients and their families respond very well to the fact that their financial adviser is genuinely concerned about their loved ones,” Kautzmann says.

When should families start to plan? It’s critical to start early, says Beth Kallmyer, senior director for constituent services at the Alzheimer’s Association. “It’s important [that] the person with the disease is involved in that planning,” she says. “In the early stages of the disease, the person who has Alzheimer’s can ensure their wishes are going to be carried out, which is empowering,” Kallmyer says. And later on, the family will have a framework to do what their family member wants when they can no longer make decisions.

Shock of Gray: How aging drives globalization and immigration

The graying of America prompts debate about nuts-and-bolts issues such as inadequate retirement savings, and the future of Social Security and Medicare. But Ted Fishman is a big picture thinker with a deep understanding of global trends. In his new book, Shock of Gray, he explains how the aging of the world’s population will drive globalization and immigration patterns in the years ahead, and determine the economic destiny of nations – and the news isn’t all bad.

Shock of Gray grew out of themes Fishman — a veteran journalist and former Chicago Mercantile Exchange trader — explored in his first book, New York Times bestseller China Inc.: How the Rise of the Next Superpower Challenges the World.

Q: What do Americans need to understand about the global aging phenomenon?

A: First, populations age differently than people do. People age minute by minute according to the clock. Populations age when people live longer than before and when families are smaller than in the past. America’s baby boom was more robust than in other, more rapidly aging countries, so the sheer number of Americans in later life is big. But the U.S. is aging a little less rapidly than other developed countries, and slower than some developing countries, including China and Mexico. Still, our median age pushes higher every year.

Robust immigration into the U.S. helps America age less quickly than most other aging countries, but the numbers of young immigrants will never be enough to reverse the aging of our population.

Q: What are the implications for the U.S. of having such a lopsided population?

A: It’s a wonderful circumstance overall, since we get to live longer, but we have to adjust to a reality humankind has never faced before. Americans who reach age 60 have a pretty good chance of getting to 95. Our aging country faces a swelling number of dependent elders at the upper reaches of the lifespan. Just as it will be more common for people in their late sixties and seventies to work, it will also be common for those older workers to have living parents to tend to. By the way, our workforce over 50 will grow to three times its current size, but the number of younger workers will stay nearly constant. Virtually all the expansion of the U.S. workforce will be in the upper age range.

Health costs fuel rise in bankruptcy among elderly

A good friend plans to throw herself a Medicare party when she turns 65 a few years from now. She lost her employer-sponsored health coverage a few years ago, and has struggled ever since with limited insurance and high out-of-pocket costs; she thinks Medicare will solve all her health insurance problems.

Medicare is fairly comprehensive, but it doesn’t cover everything — and the basic coverage doesn’t cap out-of-pocket expense if you become seriously ill or need nursing care. In fact, healthcare expenses can wreck retirement security – a fact underscored by a recent study that found medical expenses are a major contributor to bankruptcy among older Americans.

The study was conducted by Professor John Pottow, an expert on bankruptcy at the University of Michigan Law School. He found that even though the elderly account for a relatively small share of overall bankruptcy filings, the growth rate in their filings has been dramatic. For example, from 1991 to 2007, the percentage of bankruptcy petitioners age 65 to 74 rose 178 percent. Those figures reflect trends before the recession began in 2008, so it’s fair to assume the situation has worsened in the past few years due to job losses, diminished retirement portfolios and housing equity.

Healthcare is a major area of expense in retirement, and costs are rising more quickly than overall inflation.

The Center for Retirement Research at Boston College (CRR) reports that the typical married couple at age 65 can expect to spend $197,000 in lifetime uninsured health costs, including insurance premiums, out-of-pocket and home healthcare. That figure excludes any long-term care need. When nursing care is factored in, the typical cost rises to $260,000, with a 5 percent chance of hitting $570,000.

Research by Fidelity Investments shows that retiree healthcare expenses this year are 4.2 percent higher than in 2009, and have jumped 56 percent since 2002. By contrast, overall consumer prices are up just 1.1 percent so far this year. Fidelity also found that monthly healthcare costs average $535 this year, second only to the cost of food.

Retired and broke: Why retirees are declaring bankruptcy

For more and more seniors, retirement doesn’t mean a debt-free life of leisure. An increasing number of Americans aged 65 and older are declaring bankruptcy, according to a recent study by John Pottow, professor of law at the University of Michigan Law School.

Those aged 65 and older represented seven percent of bankruptcy filers in 2007, a mind-boggling jump from 1991. They are the “fastest-growing age demographic,” according to Pottow’s study.

What’s the culprit for so much debt? Credit cards. Two-thirds of Americans who filed for bankruptcy said credit cards were the key reason for their financial problems, according to Pottow’s research. Besides having more credit card debt compared with younger bankruptcy filers, 44.8 percent of those aged 65 and older also had more plastic in their wallets. “They’re using credit cards as a maladaptive coping mechanism,” Pottow says.

Stephanie Osterland, a supervisor in the bankruptcy department at GreenPath debt solutions, sees an increasing number of seniors living beyond their means. Says Osterland: “They’re just trying to live off of a fixed income, and that’s usually Social Security. Maybe they have a small pension. We find they’ve used credit cards to supplement that income and expenses or they just end up getting into a lot of medical debt.”

In addition to escalating medical expenses, seniors have seen their portfolios hit hard by the lagging stock market. Carolyn Rodi of Saving Your American Dream says those considering bankruptcy should see a credit counselor at a non-profit organization to get their finances in order.

Credit counselors, such as those at GreenPath, help the elderly deal with a stressful situation. “We try to help them focus on what it’s going to look like” after they get out of debt, Osterland says.

Rodi also recommends that potential bankruptcy filers seek out pro-bono legal aid. “There are a lot of elderly people that are being taken advantage of by bankruptcy attorneys and mortgage brokers who are advising them improperly to pay for the bankruptcy, take out a reverse mortgage or to do things that aren’t in their best interest,” she says.  ”If you have no income, why should you borrow to pay someone when you can get free legal aid?”